Walmart goes big into online grocery delivery, challenging Amazon

Walmart has been beefing up its online grocery options, including buy online, pickup in store and a pilot for in-fridge deliveries.

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Walmart is making a major push into online grocery delivery.

After testing out grocery delivery over the past two years in six US markets, the largest retailer in the world said Wednesday it will bring the service to more than 100 metro areas in the US over the coming months. With all those new cities, the service will eventually reach 40 percent of US households, the company said. Walmart plans to use about 800 stores to operate the service.

"We're going to try and accelerate this program as fast as we can," said Tom Ward, Walmart US' vice president of digital operations.

Walmart's dive into online grocery delivery continues its push to become a bigger player in e-commerce and take on Amazon. With Walmart being the US' largest grocer, the move may help the retailer fight Amazon from one of its strongest positions. Walmart may also be able to use the new service as a way to give its online sales a shot in the arm, after a holiday quarter that disappointed Wall Street due to slowing online sales growth.

Ward disagreed that Walmart's move was related to Amazon, saying: "This is our response to honestly what our customers have been looking for."

Despite the increased money and attention from retailers, online grocery remains a tiny part of the roughly $800 billion grocery business in the US. Cowen researchers saying last year that food and beverage sales online account for just 4 percent of total sales in the category, and online accounted for only 9 percent of sales for consumables like toothpaste and household goods. Amazon also has spent over a decade trying to build up its AmazonFresh grocery delivery service, but so far seen limited success.

That means both Amazon and Walmart have a lot of potential business they could move online in future years -- if consumer behaviors eventually change. For now, younger shoppers tend to buy more groceries online, but the large majority shop in stores, Cowen said.

For Walmart's new service, each delivery will cost customers $9.95 and orders must be a minimum of $30 each. No subscription is required. AmazonFresh costs $14.99 a month and is available only to Amazon Prime customers, who pay an additional $99 annually.

Walmart plans to use its team of personal shoppers to pull together orders in stores and will team up with crowdsourced delivery services including Uber to send groceries. Walmart said more delivery companies will be announced later.

The new service adds to Walmart's growing list of online options, including its popular online grocery pickup service, which is already available in 1,200 stores with 1,000 more to be added this year. Walmart has also been testing deliveries using its store employees, as well as grocery deliveries that go straight into your fridge.

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